Credit Ratings Explained

Finance companies such as MotoNovo use certain pieces of data to determine what the credit risk profile of a customer would be. Understanding how lenders may view someone when they apply for credit can give them the foundation of improving their score. Whatever a borrower might need credit for, a better rating means they are more likely to be accepted and offered better rates.

So what makes up credit ratings, and how can someone boost those factors? Find out below.         

• Does The Length Of Credit History Affect Your Credit Rating?

Lenders consider how long someone has been managing active credit for. More financial history will give them greater chances to prove that they can meet obligations and organise their finances responsibly. While lenders prefer to see that borrowers are using at least part of their active credit, maintaining low balances indicates that they are able to manage credit well.

• How Does Payment History Affect Your Credit Score?

It is important for lenders to see that borrowers make their payments on time and that they honour their financial commitments. Lenders usually offer higher interest rates to offset the risk of lending someone if they have missed any payments in the past. For each missed payment, it can take up to 16 months of on-time payments for their score to recover.

• Does The Deposit Put Down For A Vehicle Affect The Finance Options?

A loan-to-value ratio is a number lenders use to determine how much risk they are taking on with a secured loan. It measures the ratio of someone’s loan amount to the market value of the vehicle. If someone has decided on purchasing a specific car, but their LTV is too high to receive an approval, then the lender may ask them for a down payment that will reduce the amount of money they need to borrow, bringing down their LTV. Putting a greater down payment can also reduce the interest rate of the finance contract.

• Why Is Presence On The Voters’ Roll Important for Your Credit Rating?

To lenders, being registered on the electoral toll helps prove the borrower’s presence at the address on their applications and suggest responsible behaviour that is likely to result in on-time payments. The longer someone is registered to vote at a certain address, the more this factor will improve, but they will see an improvement in their score after a year and a half.

• Can You Get Car Finance With A Low Credit Rating?

It is still possible to get car finance with low credit rating. Putting a larger deposit on the car will provide better chances of being approved. The higher the deposit, the lower the amount of money the finance company has to lend a borrower, which reduces their risk. Another option might be a Hire Purchase (HP) finance. With HP the car remains the property of the finance company until the loan has been paid, which provides a greater form of security for the lender.  If you wish to enquire about current car finance options available, our friendly specialists are here to help.